The Trilogy

I would like to think that although I may pen a strongly worded perspective,
I am still approachable to the flip side of the argument. If you swim in these
waters long enough, by necessity of survival you allow a certain vulnerability
to misinterpretation of the data and a reconciliation of ones opinion.

It is interesting - although likely more a bark of posture than practice (watch
what I do - not what I say), that the majority of market participants
are drenched in overconfidence on a daily basis. Even more peculiar is as
we grind through these historically challenging and low yielding capital
environments, the propensity for arrogance has yet to be quenched with humility.

Certainly easier said than done - both the humility and reflection, and similar
to baseball where the Hall of Fame courts - if your lifetime batting average
reflects a hit in just one at bat out of three. Alas, confidence - while paramount
to success is a double edge sword.

With that said, I have repeatedly reassessed the long-term health (technically
speaking) of the precious metals market over the past year, specifically silver
- and continue to feel that its best days are behind them. This premise is
primarily based on contrasting previous asset bubbles and finding significant
overlap in both their price and momentum structures - i.e. the emotional fingerprints
left behind in the charts by traders. And while silver crested last spring
in a manner similar to the Nasdaq top in 2000 (see Here and Here),
the past year has exhibited a decline and loss of momentum much closer to another
of the asset bubble trilogies in the past three decades - the performance of
the Japanese Nikkei market in the early 1990's. By coincidence - although more
likely design, these asset bubbles have overlapped one another and expressed
themselves along similar standards of performance, duration and retracement.

A potentially positive short-term technical development and analog appears
to be unfolding - similar to the retracement rally exhibited below in the Nikkei
in August of 1991. In essence, a washout momentum low was undercut down to
the support zone found in the fall crash of the previous year - but exhibited
a positive divergence in its RSI. I find the set-up compelling, considering
the proportions and congruency of the analog to silver here. Should the fractal
continue - the bounce in SLV should make its way to the 61.8% fibonacci retracement
level before failing.

Although I am an active trader, I have always taken a broad perspective when
approaching the markets. I respect the Big Picture and attempt to place each
piece of information within its appropriate context and timeframe. I have found
that without this approach, there is very little understanding of ones expectations
in the market and an endless potential for risk.

I am not a stock picker - but trade the broader market itself in varying timeframes.
I want to know which way the prevailing wind is blowing, where the doldrums
can be expected and where the shoals will likely rise. I will not claim to
know which vessel is the fastest or most comfortable for passage - but I can
read the charts and know the risks.

I am not a salesperson for the market and its many wares. I observe it, contextualize
its moving parts - both visible and discrete - and interpret.

I practice Market Anthropology - Welcome to my notes.

Erik Swarts is not a registered investment advisor. Under no circumstances
should any content be used or interpreted as a recommendation for any investment,
trade or approach to the markets. Trading and investing can be hazardous to
your wealth. Any investment decisions must in all cases be made by the reader
or by his or her registered investment advisor. This is strictly for educational
and informational purposes only. All opinions expressed by Mr. Swarts are subject
to change without notice, and the reader should always obtain current information
and perform their own due diligence before making any investment or trading
decision.